Federal budget an opportunity for bold tax reform conversation: BDO

Federal budget an opportunity for bold tax reform conversation: BDO

Tax experts at accounting and advisory firm BDO are calling on the government to introduce a productivity-boosting tax reform agenda in its upcoming October federal budget.

Mark Molesworth, Tax Partner at BDO in Australia, says that, whilst Treasurer Jim Chalmers has some difficult decisions ahead of the government's 25 October budget, he should take the opportunity to put the government’s stamp on things by announcing a future-forward plan to implement bold tax reform.

“The Treasurer has been very clear that he sees this budget as the first in a series and if that is the case, then now is the time to announce an inquiry into the reform of the tax system so that we get a root and branch approach to the analysis,” said Mr Molesworth.

“We know multinational tax changes are on the table so we're certain we're going to see some of the detail about the changes to the thin capitalisation rules, the rules about royalty payments to tax havens, and potentially, the public disclosure of country-by-country reporting information.”

“The recent announcement denying franking credits paid by companies that made capital raisings is also an indication of the sort of tinkering that we might see announced in this budget but what we need is government appetite for reform that will make the Australian tax system more simple and more efficient.”

With the already legislated stage three tax cuts hanging in the balance, Mr Molesworth believes the government has time on its side.

“I think the size of the stage three tax cuts are up for grabs in this budget but the Treasurer may choose to wait until next year's May budget to come to a final conclusion about that,” said Mr Molesworth.

“The public expects fiscal policy in Australia to work hand in hand with monetary policy. We don't expect to see big revenue returns to people in the form of tax cuts but equally we don't expect to see massive revenue raising measures in this budget.”

“Drawing on the UK experience, the public really has no appetite for tax cuts in an inflationary environment, and closer to home, the recent Queensland land tax experience means that the government will probably have no appetite for revenue raising where that comes at a huge compliance cost.”

For more information, comment or interviews: Jotham.lian@bdo.com.au or jane.ward@bdo.com.au